The Bank of Korea continues to raise interest rates as the chip boom and inflation stalemate create a policy pressure cooker.

智通财经2026/08/27 10:51

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The Bank of Korea announced on Thursday an interest rate hike of 25 basis points to 3%, marking the second consecutive meeting with tighter monetary policy. Only one committee member opposed the decision, highlighting the policymaking team’s heightened vigilance against persistent inflation.
Although the country’s Consumer Price Index (CPI) growth in July slightly eased to around 3% compared to the previous month, it has remained above the central bank’s target level for over five years. The transmission effect of energy prices, coupled with resilient domestic demand, has led inflation to become stickier than previously anticipated.
The central bank also sharply raised its economic growth forecast, revising this year’s GDP growth prediction from approximately 3% to over 3%, and next year’s growth to nearly 3%. The main driver behind the upgrade is explosive growth in storage chip exports.
In just the first 20 days of August, exports surged by more than 50% year-over-year, with semiconductors accounting for over half of the increase. During the same period, the country recorded a trade surplus exceeding USD 1 billion. The ongoing, better-than-expected performance of Korea’s semiconductor giants is being powered by strong AI computing demand.
However, global investors’ doubts about the sustainability of the chip supercycle are mounting. The latest monthly fund manager survey shows that going long on chip stocks is now seen as the most crowded trade, and is considered the top market risk. This creates a subtle contrast to Korea’s robust domestic export data.
The central bank’s dot plot suggests at least one more rate hike is possible within the next six months. The governor also mentioned rising global bond yields and a weakening Korean won as factors influencing this decision. Tightening external financial conditions combined with domestic inflation pressure are placing a squeeze on policy options.
In the short term, the market’s focus will shift to whether the semiconductor boom can continue to offset the drag of high interest rates on consumption and investment, and if strong exports will be sufficient to support the stabilization of the Korean won, thereby providing more room for further rate hikes.

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The Bank of Korea continues to raise interest rates as the chip boom and inflation stalemate create a policy pressure cooker.

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